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Are you contemplating investing in property? However, you do not have enough money to accomplish this. In this article is a tip you may use as long as the person selling the property is willing to negotiate with you.
To be fair, not every seller will be interested (or even understand) the concept outlined. Your better gamble is to locate a property that the owner has great interest in selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and considering using this approach perhaps the owner would be happy to help you out! There are several variations that may be used depending on you and your seller. Do they want the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?
The simplest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the first lender to assume the mortgage. If you cannot get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make payments while the property remains in the seller’s name.
You take over the first mortgage and make a second mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time period – two or three years. Rather than having the money sit in a bank they can be getting a high interest over 2 or 3 years with the remainder due in full at the end of the term.
When the term ends you should be able to refinance the cost, or perhaps you could sell. Unless you hit a genuine bad market the value of the home should have risen by then.
Most mortgage lenders merely want to make a great investment. While your local bank may still shy away there are plenty of financial lenders that would like to make a deal. Financiers prefare real estate. The mortgage is usually based on 60-70% of the value of the land, so as long as they know they get their money back in the value of the property if you default, they don’t care what kind of money you make. Conclude the deal with a 2nd mortgage done with the seller. If you default they can eventually foreclose on the property and sell it, paying down the existing mortgage with the proceeds.
Now you can observe the complete picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little versatility on their part.